This report presents the research of a close examination of past, current and expected future costs of energy on a global scale under two different, but equally realistic scenarios: a business-as-usual scenario under which policies continue as they are, and a “Marshall“ scenario (derived from the “Marshall Plan” under which Europe’s economy was re-built after WW II in record time and much more successfully that anyone had anticipated).
All data and prices up to 2013 is based on World Bank, IMF and BP data. Forecasts are based on BP & IEA Energy Outlooks, and technology adaption rates that define future cost of energy systems under a business-as-usual approach and a policy-induced high investment and approach. Key findings include:
- The lack of a meaningful alternative to the fossil energy system gives fossil energy carriers a monopoly situation.
- Renewable energy is fast becoming cost competitive, and in some cases (wind power), is already cheaper than fossil alternatives.
- Renewable energy cost of other technologies, including storage, could be reduced drastically with economics of scale (investment-induced mass production and application)
- At the same time, fossil energy carriers have to be extracted from more challenging locations (tar sands, ultra-deep sea, fracking, arctic drilling, etc.), i.e. costs of fossil fuels are rising.
- This lack of alternatives to the fossil energy system led to increased global energy expenditure from 0.86% of World GDP in 1995 to 1.43% in 2013 due to higher fossil energy costs.
- Had we initiated an energy infrastructure transition in the 1995, we would have an alternative by now. The opportunity cost of not having made those investments (i.e. additional cost of the fossil infrastructure incurred since 1995), 0.57% of World GDP, is equivalent to U$ 2’778 billion. In 2013 alone.
- Not investing in large-scale renewable energy development and infrastructure NOW will cost us and additional U$ 500 billion in 2020, in excess of U$ 2’500 billion by 2025, and more thereafter. Every single year.
Click here to download the report (32 pages, PDF, 2 MB).
Climate Change is a reality. The cost of fossil fuels - the main current energy source - is increasing. This report presents to analyis of cost implications of the climate-energy nexus on different industry sectors, based on the analysis of currently available facts and forecasts:
- The scarcity of fossil energy sources and the decline of easily accessible and exploitable oil fields implies the end of a century of cheap oil. The lack of investment, increasing demand from emerging economies, and commodity speculation suggests that cost of fossil energy resources will further increase in the near future.
- There is no reason - neither technical nor financial - why the world economy should not be powered by renewable energy technologies and sources by 2040. However, a comprehensive energy infrastructure transformation would require political consensus within, and in between countries.
- The complete absence of vision and leadership amongst politicians around the globe suggst that this possibility is indefinitely small, i.e. there will be no national or international framework to adequately tackle energy infrastructure transformation and climate change.
In the face of these challenges, businesses will need to develop their own strategy to deal with the increasing impacts of climate change (mainly the increase of frequency and ferocity of extreme weather events) and rising energy costs.
Highlights of the research findings include:
- The combined cost of physical impacts of climate change, business disruption, and rising energy prices complete changes the cost structure of certain industries. For some sectors, additional cost in 2040 amount to nearly 100% of current cost
- On the other hand, new opportunities arising from climate change and scarcity of fossil resources is still grossly underestimated
- The report also shows that a business-as-usual approach (the BAU scenario) to energy-climate change challenges will be far more expensive than a Marshall approach